COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 14.11.1995 COM(95) 556 final PROTECTION OF THE COMMUNITY'S FINANCIAL INTERESTS SYNTHESIS DOCUMENT of the comparative analysis of the reports supplied by the Member States on national measures taken to combat wastefulness and the misuse of Community resources II COMPARATIVE ANALYSIS II of the reports supplied by the Member States (presented by the Coa-ission> COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 08. 12. 1995 CORRIGENDUM COM(95) 556 final /2 Nouvelles pages :A4, AS et 9. Annulent et remplacent celles du COM(95)556 final du 14.11.1995 CONCBRNB UNIQUEMBNT LES VERSIONS FR . e t B n. PROTECTION OF THE COMMUNITY'S FINANCIAL INTERESTS SYNTHESIS DOCUMENT of the comparative analysis of the reports supplied by the Member States on national measures taken to combat wastefulness and the misuse of Community resources COMPARATIVE ANALYSIS of the reports supplied by the Member States (presented by the C~ission> PROTECTION OF THE COMMUNITY'S FINANCIAL INTERESTS SYNTHESIS DOCUMENT of the comparative analysis of the reports supplied by the Member States on national measures taken to combat ·wastefulness and the misuse of Community resources The remit On 11 July 1994 the Council (Ecofin) asked the Commission to 'produ~e a progress report no later than the end of 1995 on the application of Article 209a of the EC Treaty' which enshrines the 'principle of assimilation' and aims to strengthen 'the principle of co-operation'. Subsequently, the Essen European Council on 9 and 10 December 1994 called on the Member States to ·submit reports on the measures they are implementing to combat wastefulness and the misuse of Community resources', to be examined by the Council (Ecofin) in June 1995 and submitted to the European Council in December 1995. The reports were submitted for presentation to the Council (Ecofin) on 19 June. The Council concluded that subsequent action should proceed along three lines - national, Community and partnership - to increase the effectiveness of protection of the Community's financial interests. The Cannes European Council (26 and 27 June) 'took note of the Member States' reports' and 'requested the Commission to prepare a comparative summary for the European Council in Madrid' and called on \he Member States and all institutions to persevere in the battle against fraud and waste'. The methods used The comparative analysis accompanying this document has been prepared on the basis of the national reports. It takes stock of progress in applying Article 209a on protection of the Community's financial interests and summarizes the measures taken by the Member States to combat the misuse of Community resources. The structure is the logical sequel of the structure of the Article, which sets an objective (assimilation) to be attained and prescribes the means to be deployed to counter misappropriation of Community funds (close and regular co-operation). The very existence of the single market and the transnational nature and dimension of financial /1-2 crime demand counter measures transcending the national arena and proceeding from enhanced partnership at Community level. To ensure that national reports followed a standard pattern facilitating the comparative summary, the Commission, as requested by The CoUilCil, devised a general layout to be used in preparing the national reports which was approved by the Council (Ecofin) on 20 February. .. By and large the Member States have adhered to the proposed layout. Even so, their reports are highly dissimilar. Some are only a f~w pages long; the longest has 78 pages. Above all, their content varies widely, as the emphasis is not placed on the same items. Some Member States highlight recent changes to their anti-fraud laws. Others highlight the administrative organization and distribution of functions in verifying the use made of funds. Some were mort precise than others as to the results obtained from the action taken and the follow-up to checks undertaken or observations made by the European Court of Auditors. For example, VAT fraud was. often left out even though the fact of having texts and information on VAT fraud would allow a comparison of the methods of control and recovery for this tax with those of traditional own resources. The explanation may lie partly in the short time available to the Member States for carrying out an ambitious exercise. Those responsible for compiling the reports may ' have found it impossible to gather all the requisite information and therefore concentrated on those items which struck them as particularly important. The Commission was unable to engage in the dialogue with the Member States which would have facilitated the exercise and yielded a~balanced set of contributio~s. This analysis follows the scheme suggested to the Member States. It contains comparative tables setting out the information to hand and revealing, a contrat:io, those areas where it was not possible to produce the summary. The utility of pursuing and amplifying the exercise in conjunction with the Member States will then have to investigated so that the fullest benefit of the analysis can be enjoyed. Tables are given at various places in this report tp summarize certain comparable J ) \ • • ' categories of information taken from the natienal reports; they are designed to constitute an objective ·basis for ,the comparative analysis. The ~ommission has endea~~ured to reproduce the national contribution; as faithfully a~ possible, ,but the .risk is that ther~ may be gaps in what is reproduced here. Readers seeking access to e;{haustive information on any particular point are accordingly referred . to the national reports annexed to this · summary report . '. Each part and section contains a commentary illustrating the points that appear . \ . ' . most significant. In addition, guidelines or avenues to be explored reflecting the Ecofin . - ' - Cou~cil's conclusions of July 1994 and June 1995. are offered as a means- of laying a · basis for action to pursue the fight against fraud .and wastefulness and to improve the effectiveness of the protection of the Commu~ity's financial interests, as ·c~Iied for at ·Cannes. This synthesis is a resume of the comparative' analysis, highlighting the guidance ... \ . emerging from them and which the Commission intends to examine in response to the invitation ofthe European Council. to persevere in the battle against fraud with the utmost vigour. * * * Part 1: Compliance with the .fintt. paragraph of Article 209a of the Treaty on ·~uropean U~ion (assimilationpri.nciple} ( The first paragraph of Article 209a EC reads: 'Meti1ber States shall take the same measures to counter fraud affecting the financial interests elf the Community as they take . ' . ' . ' to counter fraud affecting their own financial interests'. .This writes into' the Treaty the principle of assimilation. enunciated by the Court ; - '• of .Justice which in I9X9 specified the scope of the first parag~·aph of /\rti~lc 5 of'thc A-4 / Treaty which established the · European Community by declaring Member States'· obligations to penalize infringements of Community law ·under conditions, both procedural and substantive, which are analogous to those applicable to infringements of nationat law of a similar natur~ and importance and which, in any event, make the penalty effective, proportionate and dissuasive'. The principles enunciated by the Court and by the Union Treaty, though not identical, overlap and amplify each other. The Member States' reports suggest that this is how they see their obligations and that they apply Article s- as interpreted by the Court of Justice and Article 209a of the EC Treaty in combination with each other. Most of them accordingly cover both the measures they have taken to assimilate fraud against the Community's and their own financial interests and the effectiveness of the penalties for which they ·have made provision. 1.1 Description of national provisions (regulatory provisions, organisation of services) which satisfy the principle of assimilation This part aimed on the one hand to offer a panorama of national instruments to combat fraud against the Community budget from two angles - prevention (provisions for checks) and enforcement (provisions for penalties) and on the other hand to provide a description of the various ways in which their services are organized. l.l.l Description and evolution of the legislation It has been found that preventive measures received little attention in the national reports. In some cases they arc considered in the sections relating to the organization of services; in others they arc in the section on the law, with enumerations of instruments presented without further comment. In most cases. howcver. thc pn:ventive mechanisms are simply ignored. The reports reveal that most Member States treat revenue and cxpcnJiturc through quite separate sets of rules. The rules governing resources arc usually to be found in specific instruments of tax or customs law. The rules governing fraud on the revenue side, II - 5 which are to be found in general normative provisions, only rarely make distinctions between different revenue categories. On the resource side, the assimilation principle for enforcement purposes is not· appreciated as regards revenue categories taken individually but in terms of the legal frameworks for the different resources and must therefore be seen in the broad sense as a c~mparison between the framework for purely Community resources (the traditional own resources) and for the national resources that provide the bulk of the revenue in the national budgets(V.A.T., excise). On the expenditure side, where the reports do mention changes in the .law, they most commonly announce the creation of new specific offences of fraud in relation to grants, with Community expenditure being included. It should be noted that the enforcement of penalties may be linked by the Member States to the existence of Community rules providing for specific obligations. Finally, in the item on historical background, money-laundering legislation, which provides a means of tracing money obtained fraudulently from the Community budget, was mentioned by some Member States.